OBSERVER NEWS

Comparing EIA and IEA Reports: Look to China for Global Growth in Renewables

By: JONIEL CHA

Washington – It is the shock felt around the world – electric, that is. The U.S. Energy Information Administration (EIA), as its name implies, releases data and analyses on energy. The EIA published its annual International Energy Outlook 2017 (EO2017) Report this past September, followed by the International Energy Agency (IEA)’s Renewables Report last month. The IEA seeks to ensure clean energy and focuses on energy security, economic development, and environmental concerns. These two reports, while in agreement for the most part, had a couple of subtle underlying differences.

Summary of EIA Findings

Dr. Ian Mead, Assistant Administrator of the EIA, presented on the EO2017 at the Center for Strategic and International Studies (CSIS). World energy consumption is expected to increase by 28%, he asserted, from 575 quadrillion British thermal units (Btu) in 2015 to 736 Btu in 2040. Unsurprisingly, Asia accounts for most of the increase in energy use in non-OECD (Organization for Economic Development and Cooperation) regions (60% by 2040). Renewable energy is the world’s fastest-growing energy source, increasing at an average rate of 2.8% per year between 2015 and 2040. Still, fossil fuels remain dominant, expected to supply 77% of the world’s energy consumption in 2040. Unfortunately, energy-related carbon dioxide (CO2) emissions will rise by 25% in non-OECD countries, but will remain relatively flat in OECD countries.

Renewables and natural gas will provide 57% of electricity generation in 2040. Consequently, coal is slowly getting squeezed out. Wind and solar energy dominate growth in renewables and represent two-thirds of related capacity additions by 2040, but hydropower remains the dominant renewable energy source. The U.S. is predicted to supply 50% of the world’s natural gas in 2015-2030, and 70% in 2040.

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Source: Bloomberg

However, the EIA’s forecasts of energy trends have been criticized for failing to account for the real-world price declines and growth rates for onshore wind and solar photovoltaic (PV) power. Additionally, the EIA ignores the continuing improvement in performance of these renewable energy technologies.

Summary of IEA Findings

The IEA Renewables Report outlines the growth in renewables. Noteworthy trends are as follows: 1) Renewable policies are spurring greater competition. 2) Auction prices for wind and solar technologies deployment continue to fall. 3) The IEA predicts 30% of electricity generation to come from renewable energy.

Heymi Bahar, the Project Manager of the Renewable Energy Division at the IEA and SAIS alum, spoke on the IEA report at an event hosted by the Center for Strategic and International Studies (CSIS). Renewables accounted for almost two-thirds of global net power capacity in 2016, with an additional 164 gigawatts (GW) online, including 74 GW from solar PV and 52 GW from wind. The strength of the global solar market, particularly the market in China, fuels growth. Auction prices of solar PV have reached record-lows in 2016. However, the IEA projects that renewable energy capacity will increase by 43% (920 GW) by 2022. This year’s renewable forecast is 12% higher than that of last year due to increased solar PV deployment in China and India. IEA’s solar PV forecast has been revised multiple times due to technology cost reductions and China’s significant investment into the development of solar-powered energy generation.

China, the United States, and India are expected to account for two-thirds of global expansion in renewables in 2016-2022. However, the IEA predicts that coal will remain the largest source of electricity generation in 2022. Despite solar capacity growth, the IEA agrees with the EIA in that hydropower will remain the largest source of renewable electricity generation – followed by wind, solar PV, and bioenergy. China is the world market leader in solar PV, wind, hydropower, bioenergy for electricity and heat, and electric vehicles, accounting for 50% of global solar PV demand and 60% of total annual solar cell manufacturing capacity. Still, China faces two major challenges: growing cost of renewable subsidies and grid integration.

Overall, the EIA and IEA agreed on general predictions that natural gas and renewables are expected to take over the electricity mix in 2040, as oil and coal decline. The rapid growth, plummeting costs, and competitive auctions of renewables explain the IEA’s prediction of an additional 920-1,150 GW growth (led by China) in renewable electricity capacity by 2022. The IEA’s solar PV forecast has been revised multiple times due to technology cost reductions and China’s significant investment and development. IEA Executive Director Faith Birol announced, “We expect that solar PV capacity growth will be higher than any other renewable technology through 2022.” Regarding under-predictions of renewable energy growth, an IEA representative asserted, “We want to be wrong, so that policymakers are moved to action to avert the undesirable predictions.”

Joniel is a second year ERE concentrator. His contributions to the SAIS Observer seek to keep the SAIS community informed about the energy sector.

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